Results indicate that consumers stressing over debt don’t ask for help due to lack of trust
Among the issues causing financial worries among Canadians, debt is likely to be in strong contention for the top answer in a game of Family Feud. As the problem continues to affect households in Canada, an apparent disconnect between borrowers and lenders stands in the way of a solution.
In a new survey of over 2,000 borrowers and 250 lenders, DUCA Impact Lab and Angus Reid studied an apparent disconnect between the two groups, as well as how borrowers feel they are being impacted by issues with debt.
Nearly half of borrowers polled said that personal debt has affected their ability to save and build wealth. A significant number of borrowers were also said to report feeling stressed due to personal debt, prompting unhealthy behaviours such as trouble sleeping, skipping meals, eating unhealthy foods, and spending more time alone.
Segmenting the borrowers suggests that debt is felt differently across generations. Borrowers with a mortgage were more likely to be wealthy and older individuals and have a good credit score; they also appear more able to manage their financial affairs, with 78% reporting good personal finances.
In contrast, borrowers without a mortgage — a quarter of whom are millennials — 49% reported that they have poor personal finances. This finding becomes more concerning given the fact that 42% of millennial borrowers in the survey said they prefer minimal to no contact with their financial advisors.
The tendency to stay away from financial advisors is not just a quirk of the younger generation; over one third of borrowers (37%) said that they avoid their financial services representatives. They reportedly perceived a pressure to manage their finances in a way they do not feel comfortable with, and received recommendations of financial products that they do not understand.
The information gap among consumers isn’t lost on 42% of the Canadian lenders surveyed, who admitted that borrowers don’t understand the financial products they purchase. Aside from that, around half of lenders polled reported that client comfort and level of knowledge were not priorities considered in their product recommendations.
“The findings of this study bring to light some important gaps in the current banking system which fail to serve the best interest of the average Canadian,” said Doug Conick, president & CEO, DUCA Credit Union and chair of the DUCA Impact Lab.
While some lenders may say they want to responsibly promote their products, borrowers still question their motivations. A quarter of Canadian borrowers polled said they don’t trust the advice of their financial institution. The fact that 42% of Canadian lenders in the poll said they were sales-driven as opposed to customer-driven doesn’t help.
“Whether it be navigating the best way to manage household debt or raising awareness around financial literacy and the products and services available more broadly, lenders should make it their shared responsibility to better support borrowers,” Conick said.
